In March 2014, consumer credit regulator the Office of Fair Trading (OFT) exercised its power to suspend a consumer credit licence with immediate effect once again, but on this occasion it was a payday lender who fell foul of the regulator, the first time this power has been used against this type of company. With consumer credit regulation passing to the Financial Conduct Authority (FCA) from April 1 2014, this may also be the last time that action is taken against a lender in this way by the OFT.
The OFT suspended the licence of London-based online only lender Micro Lend UK Limited. No reasons were given in the release for the decision, but the OFT’s press release says that “suspending the licence is urgently necessary to protect consumers.”
Micro Lend has until March 24 2014 – three weeks from the date the suspension was announced – to make representations regarding the decision to the OFT. The OFT’s Adjudicator will then either confirm the suspension or withdraw it.
It was anticipated that the OFT would act in this way where there was evidence of fraud, dishonesty or violence; where there was a need to protect vulnerable customers; or where the firm failed to comply with previous instructions from the OFT or Trading Standards.
Most firms who are subject to OFT enforcement action are allowed to continue trading until appeals have been heard against decisions to revoke licences.
This is only the fourth time the OFT has immediately suspended a licence since it was given the legal power to do so in February 2013. In June 2013, Donegal Finance Ltd, a Staffordshire-based credit broker and debt collector which used the trading names Donegal Finance, Donegal Investigations and Donegal Recovery was suspended from trading. Then in July 2013, Andrew James, a Worcestershire-based motor dealer who used the trading name Apex Car Finance, became the second to lose his licence in this way. Another motor dealer, Shropshire-based Jonathan Rochford, trading as Phoenix Car Centre, was subject to this sanction in December 2013. On these three occasions, the OFT also gave no details of the reasons for the action.
Payday lenders can expect tougher regulation once the FCA takes over as their regulator in April. A series of new rules for lenders to follow regarding rollovers, continuous payment authority, risk warnings and treatment of borrowers in financial difficulty have been announced. The FCA has additional resources to supervise firms and can impose a wider range of enforcement penalties.